In a blow for power companies, Allahabad High Court refused to give any interim relief to firms on the Reserve Bank of India’s (RBI) resolution of big-ticket non-performing assets (NPA). The order will affect as many as 80 large borrowers as the 180-day grace period granted by RBI ends today. The power firms will now face the bankruptcy tribunal.

The high court mandated initiating of insolvency proceedings by lenders against defaulting projects of companies. The court has asked the centre to decide and take action under section 7 of the RBI Act within 15 days on power companies.

Allahabad HC also asked high-level empowered committee on power to decide within two months on the resolution in consultation with RBI.

According to the central bank’s revised framework for the resolution of stressed assets, now popularly referred to as the February 12 circular, banks were given 180 days to resolve defaulting accounts of over Rs 2,000 crore.

The new rule mandates lenders to initiate insolvency resolution under Insolvency and Bankruptcy Code (IBC) if a resolution plan is not approved even at the end of the 180 days of first default.

Meanwhile, power ministry officials said the decision on power sector stress will take only after reading the HC order.

Impact of Allahabad HC order will now go beyond 34 identified assets, the officials told CNBC-TV18. "The order may impact more Gas based power plants," added the officials. The ministry may call a meeting of empowered committee soon to discuss the matter, said people aware of the development.

Harry Dhaul, director general, Independent Power Producers Association of India, said that they are respecting the court order. "Financial institutions can initiate proceedings under the IBC," he said, adding that the companies can independently appeal to the court.

Bankers will now have to follow RBI circular for all stressed assets, said Ravi Krishan Takkar MD & CEO UCO Bank.

If Allahabad Court stayed the order, it would have provided some interim relief to bankers, Takkar said.

First Published:Aug 27, 2018 3:41 PM IST